Canadian Underwriter

U.S. House moves to extend airline cover

April 5, 2002   by Canadian Underwriter

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The U.S. House of Representatives has proposed a bill to extend the limit on third-party liability damages as a result of terrorist attacks until the end of 2003. The bill, put forward by Rep. John Mica, chair of the House Subcommittee on Aviation, continues the limit of $100 million established by law after the terrorist attacks of September 11, 2001. If third-party damages exceed $100 million, “the federal government would most likely establish a compensation program similar to the compensation fund created for the third-party victims of the September 11 attacks”, notes a House press release.
The limit applies only to third-party liabilities, as in people on the ground or in buildings hit by a plane, not to passengers and their families. In effect, the limit puts the government in the role of excess insurer to the airlines. Currently, the limits are in effect until mid-May.
“This bill recognizes that a terrorist attack similar to the attack of September 11th is really an attack against the United States, so it is only right that the United States, rather than the airlines that happened to be the terrorist tool, bear much of the financial burden for injuries to third parties,” says Mica.
Bill co-sponsor Rep. Don Young, chair of the House Transportation and Infrastructure Committee, says that the airlines would not likely be able to cover the damages should another event like the September 11 terrorist attacks occur. Shortly after September 11, insurers cancelled airlines’ coverage for third-party liabilities as a result of terrorism.
“Without a limit on their liability for damages to third parties, the nation’s airlines will incur significantly higher insurance costs at the same time that they are suffering from staggering losses as a result of the September 11 attacks,” the release goes on to say.
The December 31, 2003 deadline could be further extended by Congress at that time, although it is currently the point at which the federal government will no longer have authority to issue war-risk insurance.
However, “if [the bill] is signed into law, Congress could also consider what to do about the liability limit at the same time that it is considering what to do about the underlying authority of the FAA to insure airlines against the risk of war and terrorist acts,” the release notes.

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